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The New Zealand government’s first social bond, set to target employment for people with mental illness, has failed to get off the ground with the Not for Profit provider withdrawing from the scheme.

In 2013 the government began investigating the use of the social bond model and allocated nearly $29 million in last year’s budget to support four bonds.

The first program due to roll out would have involved employment consultants working in GP practices to assist people with mental illness into the workforce.

However, negotiations reportedly broke down, leading the provider, Wise Group, one of the largest non-government organisations in New Zealand’s mental health sector, to walk away.

Wise Group said it was unable to comment on why the bond collapsed, with all inquiries directed to the county’s ministry of health.

But Platform Trust, a body supporting mental health organisations of which Wise Group is a member, told Radio New Zealand the outcome was disappointing but not surprising.

“I think it’s absolutely indicative of the cost to the community sector of doing business with government. We’re seeing this over and over again,” Platform Trust chief executive Marion Blake said.

“The government is inviting innovation, inviting propositions that will change the way that we do things, but yet we go through what appears to us, from the community sector, as tedious bureaucratic slow processes that kill things before they’re even born.”

The bond was expected to have already started, but private investors were reportedly put off because the government would not guarantee financial security if the bond failed.

New Zealand’s ministry of health website said the three other areas to be targeted by social bonds were youth offending, adult reoffending and the management of chronic illness.

In Australia, New South Wales was the first government to trial social impact bonds, followed by South Australia. Both Queensland and Victorian governments have expressed interest into the model.

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